The 5$ SaaS

The 5$ SaaS(alpblog.heroku.com)

80 points by wzhack 13 years ago | 37 comments

zizee 13 years ago |

Can a mod please change the of this article to point directly to the blogpost (http://ahmetalpbalkan.com/blog/the-5-saas/), not via Heroku.

There is no reason for this redirect, plus I clicked through thinking that this article was from the good people of Heroku.

jacques_chester 13 years ago |

Availability bias. There are many SaaS companies making many different offerings.

Choosing $5 as your price point because everyone else does it, or because you think it would be an easy sale, or because you feel bad about asking more, is stupid.

Don't do that[1].

Give pricing a tenth of the care and attention you give to your code. Because it is the single most important lever of profitability you will ever control, and it is much easier to pull it before you launch than afterwards.

[1] http://chester.id.au/2012/09/12/review-the-strategy-and-tact...

hendi_ 13 years ago |

My SaaS app was priced exactly 5$/month previously. It had a decent conversion rate, a handful of users, lots of support requests, and a bit of revenue.

Meanwhile I've increased the prices, the cheapest plan is now 29$/month. Guess what? Conversion rate didn't change, thus I gained new users at the new price point (I of course grandfathered old users), and of course the revenue increased almost by a factor of six. What's also interesting is that I get way less support requests from the people who pay more, thus the six-fold increase of the monthly price resulted in more than six times profit (profit = 6 * old_revenue - 3 * old_support_request_rate)

Juuumanji 13 years ago | |

Is your SaaS B2B or B2C?

hendi_ 13 years ago | | |

My SaaS is Bunker App (https://www.bunkerapp.com/), and its customers are freelancers. I don't know if this qualifies as B2B since most of my users are single freelancers or at most small shops.

netcan 13 years ago |

The the relatively recent rise of two big types of software pricing & distribution is a opportunity to notice how different things in markets interact in these markets. If you spend your career in software you forget how weird an industry with n marginal costs is.

An app store lends well to $1-$10 apps creating a demand creating a supply.

Web based Saas lends well to $5-$50 apps creating a demand creating a supply.

If you need a sales consultant or a long decision making process you need to go into the 5-6 figures realm.

These things didn't happen because consumers really wanted smartphone apps that happened to cost around $1 or webapps that happened to cost $5 per month. The marble dictated the sculpture

Consumer webapps need to be sold as monthly subscriptions. Subscriptions have a customer decision making and vendor responsibility overhead that makes $5 roughly the lowest possible price, so you naturally get the "cheaper" apps bunching around the lowest viable point.

B2B web apps/services were able to crack into a price range that was inaccessible before. $1500 one off payment for a shrink wrap version is too expensive for self service sales & too small for a sales teams. $99 p/m with 30 days free isn't. Whole programming cultures formed around this new opening.

impostervt 13 years ago |

I priced my side project at $5/month, because it was the lowest amount of money that made it worth doing the work.

I did A/B testing before I started charging, and there was no difference between charging $12/year, $3/month, $4/month, and $5/month. Which is crazy, but it reached statistical significance according to optimizely. And fewer customers for the same money sounded good to me.

scott_meade 13 years ago | |

Why price at the lowest amount that makes it worth it instead of the highest amount that people will pay? Said another way, did you test $6/month, $10/month, $20/month?

impostervt 13 years ago | | |

No. I should have, but at the time I wasn't getting very much traffic so it was hard to test many options and achieve significance. I was honestly surprised people would pay more than $12/year, and just counted my blessings.

sondh 13 years ago |

He mentioned the github $5 plan however I always pays $7 each month since the beginning. I checked github pricing[1] and it's showing the micro plan starts at $7/mo. Is there a lower plan by buying in bulk, paying annually or else?

[1]https://github.com/plans

EwanToo 13 years ago | |

He's updated it to say:

* I have a $7 educational discount and I buy $12 plan on GitHub, normally they don’t offer a $5 plan.

feyyaz 13 years ago | |

If you get an student discount which is $7 off every month for 2 years, and buy a $12 plan, you pay $5. At least that was the case for me, maybe he forgot to mention. I'm not sure.

6ren 13 years ago | |

I have a free account on github, but I must be a terrible customer, because starting from my account, it took about 8 clicks to find the pricing information. I ended up having to go through the FAQ, and one question happened to link to the plans. Either that, or github has very relaxed attitude about sales. Maybe they only alert you to it when you attempt an action that requires an upgrade (e.g. too many repositories).

damncabbage 13 years ago | | |

It tells you about paid plans whenever you go to create a new repository, and on the front page when you're logged out, but otherwise, yeah, it's pretty obtuse if you're an existing user.

UnoriginalGuy 13 years ago | |

I might get blasted for this but I always found Github a little on the pricey side from a personal perspective.

I mean I love how they treat the OSS community and I like the product they ship, but $12/month for what is essentially a worse product than what DropBox gives you for free.

dkroy 13 years ago | | |

Or even BitBucket.

andrewkkirk 13 years ago |

Most of my paid SaaS plans are closer to the $9-$19 dollar per month range.

Examples: Freshbooks, HootSuite, MailChimp, KISSmetrics, Dropbox

bdunn 13 years ago | |

And all of the above are B2B products, whereas the OP described B2C products.

That's a very important point to make: There's a comfort zone of about $5 a month that the typical consumer will pay for SaaS software. There really is no cap for businesses, as it's much easier to gauge the ROI of software that eliminates a position vs. software that tracks your runs.

microtonal 13 years ago |

The site seems to be down already. Google Cache works:

http://webcache.googleusercontent.com/search?q=cache%3Aahmet...

damncabbage 13 years ago | |

dilara: You are currently hellbanned, nobody can see your comments (including the useful one you just posted with the real link to the blog).

philip1209 13 years ago | |

The submitted link is from Heroku - I suspect that they are tracking links and forwarding to Svbtle, and it may be the Heroku forwarding that is down.

jpalomaki 13 years ago |

When will we see somebody starting to bundle the services from different providers? Throw in number of useful services, give some discount.

fmavituna 13 years ago | |

So 19$ instead of 25$ for 5 services? Why bother? Or you got something more elaborate in your mind?

camus 13 years ago | |

well , these are on demand services , so bundling them would make little sense unless the bundle is very flexible ( i.e. you can choose 10/20 out of XXX services for a fixed monthly fee ).

Mythbusters 13 years ago |

Netflix is not at $5 but almost there. So is Hulu+. Does the Xbox music have subscription or is it free?

jbigelow76 13 years ago | |

The current incarnation of XBox music, the Zune service, is only 10 bucks a month, but no free option.

Difwif 13 years ago | | |

Also with Windows 8 and Windows RT devices Xbox music will have a free ad supported version.

feyyaz 13 years ago | | |

Last.fm also runs on XBOX very well and widely used.

pdonis 13 years ago |

The big thing I notice about this list is what's not on it: Google and Facebook. Imagine if you could pay $5/month to Google for search services and not have to worry about the long-term consequences of the ad-supported business model.

fakeer 13 years ago | |

Yes I imagine that and "you" will be a very small (tiny) subset of the entire population that uses Google and it will be so inconvenient seeing the (growing) dependence.

debacle 13 years ago |

Back when I used it, MyFax was absolutely critical for pretending we had a fax machine.

fmavituna 13 years ago |

Although it's one of the worst models for startup. If volume is possible that means too many players in that market. Startup is already a risky business, why make it even harder by going into a space where you have to fight with lots of other big / small / medium players?

mattmanser 13 years ago | |

What a load of utter nonsense. Many of HNs favourite startups operate in saturated spaces.

fmavituna 13 years ago | | |

Survivor bias?

riffraff 13 years ago | |

isn't there something to be said for "a smaller slice of the bigger pie" ?

fmavituna 13 years ago | | |

It applies to certain things but I don't think that applies to $5 SaaS. Because to be sustainable you'll need 1000-5000 customers, even though those numbers can be small in that big pie, it's still extremely hard to reach and support.

However you can easily get a smaller slice of the bigger pie in an enterprise market with 20 customers instead of 5000, and that's much easier to accomplish.

This model seems more suitable for "go big or go home" players.